The International Monetary Fund (IMF) on Thursday called for a broader, simpler, fairer and more predictable taxation system in the country to generate resources for human capital development, infrastructure and investment, saying this would help raise Pakistan’s potential gross domestic product (GDP) and improve living standards. Speaking at a session titled “Where Reforms Matter the Most for Growth?” at the Sustainable Development Policy Institute's (SDPI) 29th Sustainable Development Conference, organised by the Ministry of Finance, the IMF's Pakistan representative, Dr Mahir Binici, praised the country’s efforts to maintain economic stability amid recent global and domestic challenges, but stressed the need for deeper and broader reforms to put the economy on a sustainable growth path. He said Pakistan had reached a critical juncture where the narrative needed to change, with discussions moving beyond taxation to focus on how reforms could translate into investment, economic activity, exports, employment and improved living standards. Where Reforms Matter the Most for Growth? https://t.co/lAB92QuI8j — SDPI (@SDPIPakistan) November 5, 2026 “I think Pakistan has already done the hard work and, from this point forward, it is really about how to cement that stabilisation and where we are right now, and move towards a direction where we have more investment, activity and better jobs,” he said. Binici outlined five key areas that could help improve the country's growth prospects, including preserving macroeconomic stability and strengthening the foundations needed to transform the economy from stabilisation to sustainable growth. He said fiscal and external sustainability, along with adequate buffers, were essential to maintaining a strong macroeconomic foundation. Pakistan had demonstrated the importance of building buffers and maintaining stability in the face of recurring domestic and external shocks over the past two to three years, he said. He cited the recent Middle East conflict, recurring climate-related shocks and heightened global uncertainty stemming from trade, tariffs and geopolitics as challenges that underscored the need to maintain economic resilience. “Right now, we have seen that stability has been maintained given the most significant shock that is due to the war in the Middle East and recurring climate-related shocks, and extremely high global uncertainty, whether it is driven by trade, tariffs or geopolitics,” he said. Binici also stressed the need to maintain fiscal discipline and increase revenue collection as a share of GDP, particularly through taxation. “Our fund's research has shown that countries like emerging developing economies like Pakistan need, at least, as a threshold, somewhere around 15 per cent of GDP in revenue so that they can actually have a strong, well-functioning state and capacity that can provide services and enable better living standards,” he said, adding that Pakistan was still far from that level. He said fiscal discipline needed to be supported by price stability and continued efforts to build buffers. The IMF representative identified governance, the national tariff policy and the cost of doing business as key areas where Pakistan needed to secure a significant growth dividend. He said these were also central to the reform programme, particularly in the areas of energy and governance. Binici said governance should be treated as an economic policy, commending the authorities for completing the Governance and Corruption Diagnostic and preparing an economic governance reform plan. While describing the country's performance over the past two to three years as a strong achievement given the challenging global and domestic environment, he said considerable work remained to place Pakistan on a stable and sustainable footing. He called for a growth-friendly fiscal system, saying there was broad stakeholder understanding of the need for a broader, more predictable tax regime. “We need a broader, simpler, fairer and more predictable taxation system. That would also enable increasing revenue, not only for the sake of increasing revenue but also generating the resources that the country needs, whether for human capital, infrastructure or investment,” he said. Such resources would ultimately help increase potential GDP and improve people's living standards, he added. On human capital development, Binici said investment in people was a critical element of growth-oriented reforms. He noted gradual progress in this area, particularly in health and education spending as a share of GDP. He said spending on health and education had increased from around two per cent of GDP over the past two to three years, and he intended to raise it to between 2.8-3 per cent in the current fiscal year. “It is still, I think, far below our peers and what Pakistan needs, but there has been some gradual progress,” he said. Binici said restoring economic stability, maintaining it, rebuilding confidence and strengthening buffers constituted a significant achievement given the challenging circumstances. He called for deeper, broader reforms, with proper sequencing and targeting, to place the economy on a stronger, more sustainable growth trajectory. The IMF has repeatedly raised concerns over Pakistan’s taxation system and the slow implementation of structural reforms, particularly those aimed at improving the governance of state-owned enterprises, reducing market interventions and enhancing transparency in public finances. The Fund has also flagged significant statistical discrepancies in the federal budget, raising questions about the transparency and accuracy of government accounts. Most recently, IMF Regional Director Jihad Azour highlighted weaknesses in the country's tax system and called for a fairer and more neutral taxation structure to improve compliance and encourage business expansion. “A fairer tax system can encourage compliance, better services can strengthen trust, and a more neutral tax structure can allow productive firms to expand rather than remain small or informal,” Azour had said during the first day of a two-day conference on the tax system last month. Read: IMF pushes targeted subsidies He identified broadening the tax base, strengthening revenue administration, reducing tax expenditures, protecting priority spending and improving public service delivery as key priorities for Pakistan. However, the implementation of tax reforms under the IMF programme has remained uneven, with influential sectors, including retail, agriculture and real estate, making limited contributions to the national exchequer during the first two years of the programme. The Fund agreed in June this year to reduce withholding tax rates for the real estate sector. It also endorsed a tax scheme for traders that allows cash transactions, a provision that critics say could encourage informality. As of October 15, only 137 new retailers had joined the scheme against an annual target of one million. The Fund's concerns extend beyond taxation. During discussions with Pakistani authorities in September, it flagged delays in state-owned enterprises' reforms, continued market interventions and a lack of budget transparency. Azour has stressed that stabilisation alone is insufficient. Pakistan needs reforms to raise productivity, improve competitiveness and attract private investment. He also said transparent rules and the absence of preferential treatment were essential to encouraging tax compliance. The limited contributions from influential sectors and continued reliance on cash-based transactions under the traders' scheme have raised questions about the government's progress towards the fairer tax system advocated by the IMF.